Kim Blascoe, senior director of CAS professional services at CPA.com, shares some of the highlights of their most recent CAS Benchmark Survey — from the area’s extraordinary growth rates, to the key practices of a high-performing CAS practice.

Transcription:

Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Dan Hood (00:04):
Welcome to On the Air With Accounting Today, I’m editor-in-chief Dan Hood. However you define it, CAS is one of the hottest areas for growth in accounting. It’s also one of the hottest areas for change, as firms develop and evolved their practices. Well, CPA.com has been a promoter of CAS from way, way, way back, and it regularly covers this space with its CAS Benchmark Survey. Here to talk about some of the results of the most recent survey as Kim Blascoe, she’s the senior director of CAS professional services at CPA.com. Kim, thanks for joining us.

Kim Blascoe (00:30):
Thanks, Dan.

Dan Hood (00:31):
Yeah, no, this is a great survey full of in-depth information. We were talking earlier, it’s kind of difficult to present survey data in a podcast format, so we’re going to touch on more of the highlights, but I would totally encourage people to go find the survey and see some of the results. I know it’s popped up in a lot of places online. Before we dive into the survey, this is something I do with everybody we talk about CAS with is how would you define CAS because everyone has a slightly different definition. So how would you or you and cpa.com define CAS?

Kim Blascoe (01:00):
Yeah, so that’s an interesting question and we work with a lot of firms and really when we’re working with firms, we talk to them about, this is the, and I’m going to explain that here in a second, but this is the definition we [email protected], but we also talk to firms about their own vision of CAS and what their CAS practice should look like for them when they talk about their vision. It was something we did consider very heavily when we started working on the fourth edition of the CAS Benchmark Survey, and we really did embrace the fact that there’s not only one definition and that people use that CAS moniker in different ways and we’re open to that. But what we do know and what we did see as results from the benchmark survey was that the cpa.com definition of CAS, which talks about the breadth of services that you offer from transactional to business insights, that technology is the foundation to standardizing those services, that higher CAS margin practices tend to be niched. So we’re very much focused on doing niched type of services and that having a plan and a strategy is really, really important to the CA practice and dedicated staff also very important. So I think a lot of things that we work on is not necessarily having the exact same definition from firm to firm, but actually really looking at an overall definition and figuring out what that looks like inside of your firm.

Dan Hood (02:27):
Right. Well, I will say one of the reasons it’s great to get CPA dot com’s definitions, as I mentioned, you guys have been proselytizing CAS for a long time, so I think a lot of people get their idea of what CAS is from you. So it’s helpful to have that, but as you say, everyone has a slightly different definition. Alright, with that behind us, with that defined, I mentioned that CAS is growing pretty fast, how fast is it growing and how would you say that compares to some of the other sort of more traditional offerings of accounting practices?

Kim Blascoe (02:55):
Yeah, I am going to give you a couple numbers here probably, and when we talk about the benchmark survey data, one of the things that I need everybody to keep in mind that we talk about medians, right? So it’s not an average, it is the number in a set of results so that everybody understands what that looks like. So medium revenue growth for the all respondents. And so there’s two categories too. So there’s the all respondents category category, everybody that’s responding to the question. Then we also have a category where we talk about the high achievers, the top performer types of

(03:29):
Most often I refer to the all respondents, the all respondents on the growth percentage, which I am going to share 17% because it continues to be a double digit number, which is really very different than what we’re seeing from overall growth inside of the accounting industry as a whole. So I find it interesting a lot of times, and I know we have a ICP slides like Barry has shared that typically from a firm perspective we see more somewhere between five to 8% growth inside of firms. So when you think about what we’re doing in CAS with a median of 17%, that’s significantly higher than what firms doing. The other thing we asked in the CAS Benchmark Survey is what does that look like from a projected one year perspective? And the number on that was about a 15% median and then what does that look like from a three year?

(04:24):
Because we wanted to see what firms were thinking about in CAS leaders. Were thinking about from a growth perspective a little farther out than where we were at today. The three year was double the number of what we were looking at. So significantly higher than what we’re looking at today. So I don’t think we’re going to see CAS revenue decline at any point in the future. I think we’re going to continue to see it grow as well as advisory overall inside of firms. I think right now a lot of firms are third, a third, a third between tax audit or a test and advisory. I think we’re going to start seeing those numbers skew and advisory is going to take over a bigger percentage of revenue and firms as well.

Dan Hood (05:09):
That three year number is fascinating. I mean to a certain degree, if we go back in the previous surveys, I think you find that the CAS has always been in a similar range, right? 14, 15, 16% certainly double digits and double roughly double what some of the more traditional service areas are growing at. But some of that you could assume as well, some of that it’s just, it’s a new service line. If you’re starting from zero, you’re going to grow very fast. And we had a big boost from the pandemic I think put a lot of people into looking for CAS-type services. But so the fact that people are looking out three years and still seeing that high level of growth, it’s not just the kickoff where things naturally grow fast. That’s pretty encouraging.

Kim Blascoe (05:51):
It is. And we have a lot of firms that are just getting into CAS, which is kind of hard to believe, but there are even a lot of top 100 firms that are just starting to get into CAS. And you’re absolutely right. If you’re just getting into CAS and you’re in year one and you’re looking at year three, you are definitely going to have major growth in that timeframe versus more mature practices that are definitely slowing at a grower slower pace than that.

Dan Hood (06:17):
And there’s still plenty of room for expansion. I think that the more we hear just firms need to expand more, but there’s lots of clients still out there looking for help. So, sorry, so you said, was it now I’m going to totally misremember this number. You said 17% growth for all respondents. Did you say what the high performing number was or did what?

Kim Blascoe (06:37):
Yes, it’s 19%. 19%. We shared a little bit later, but also road out there.

Dan Hood (06:43):
Yes, I spoiled it. I spoiled it for everybody’s. Okay. But everyone in the audience was like, I need to know we can’t hanging like that there they’ll, they’ll get upset and be like, I need to know. Alright. But that’s a little teaser for later. We’ll talk more in depth about that I’m sure in a bit. You talked about advisory services and the survey notes, the firms that offer higher level service offerings as part of CAS perform better and usually higher level service. I’m assuming that’s sort of that’s a proxy for advisory services. It’s not the transaction-style CAS though that’s crucial to the services whole. What sort of services are we talking about there when we say the higher level services that advisory services specifically in the CAS context.

Kim Blascoe (07:26):
So we still talk to firms a lot about making the move over to that advisory side of the house. So we’re talking about when we talk about spectrum of services, we talk about transactional services, controller services, CFO and business insights. So that whole spectrum of services that we offer inside of CAS practices, we know it is still a very slow shift to those higher level services, CFO and business insights. And even though a lot of firms say they’re doing it, they’re really maybe just dabbling in it. And the other thing that we often see is that the beauty of the CAS practice is that we can start providing some form of advisory services even at that transactional level and people that are newer into their careers. So you think about advising on chart of accounts, advising on expense categories, advising on transactional processes and how things are being coded.

(08:19):
Those all happen at that lower level transactional type of service. So it gets your younger staff more acclimated to starting to think about advisory, which really starts probably happening more at that controller level and then moving into that CFO and business insights. So even though it’s still a slow role towards some of those services, we are making progress and we are seeing more firms move towards those higher level services. The other thing I would add to that too, just one other thing I want to add. You mentioned this, we certainly have all sorts clients looking for different services. So some clients are looking for everything to be outsourced. They want to hand everything over to the firm and they don’t want to deal with any of it or minimally me minimally deal with it. But then we also have maybe industries or niches that really play in that controller CFO business insights space. So a lot of it depends on if you’re looking at niching your practice, which I highly recommend looking at some of those industries that you’re going to work in and what types of services potentially would be offered in those industries.

Dan Hood (09:28):
It’s fascinating to hear you describe those sort of services that even less experienced accounts can offer. I think for a lot of accountants they would say they wouldn’t even think of that as advisory. They would think of that as just part of the transactional work. I have to explain, I’ve got to tell them that you’re mischaracterizing that or that’s going in the wrong column or you’re using the wrong chart of accounts. They wouldn’t necessarily think of that as advisory services. And this goes to one of the issues why a lot of people think that the transition is difficult is because accounts don’t think that they’re ready to offer that kind of advisory services, but in many cases they already are. They just don’t think of it that way. I would take a lot of that stuff is sort of you have to do it anyways to get through the compliance work. You have to give that advice and I think if they knew that that was actually advisor services, they might be more comfortable with it.

Kim Blascoe (10:16):
And I think when it comes to, I mentioned the industry thing, but when it comes to the services, I think that transactional work is such a basic core to the end game of the CFO and business insights. Because if you spend all of your time cleaning up the client data, you really don’t even have time to get to the CFO and business insights. So I still acknowledge that there are certain industries that it’s just really hard to do that transactional workforce construction being one of ’em. But there are definite advantages to being able to provide all the spectrum of services because when you then get to that CFO and business insights that the information that you’re working with is good solid data and you can move forward talking to the client about the future of their businesses and what they’re doing. So definite choices within the CAS practice depending on the industry and niche that they’re working in, but pros and cons to all of it.

(11:12):
And I love the fact that getting younger associates involved in some of that advisory stuff and thinking through the fact that really what they’re doing is advising with those clients so they start getting comfortable with it. Because one of the things that scares associates most is that they don’t feel like they have all the answers and then they’re like, I can’t sit down and talk to a client about something. And I’m like, nobody has all the answers. You just have to feel comfortable with the fact that you can say, I don’t honestly know that if I was going to answer shoot from the hip or something, I would say this, but let me go back and find out what the actual answer is and then I’ll get back to you. And the point of that is you have to get back to ’em, right? But getting younger associates comfortable with those conversations with clients and just talking to ’em about things about coding and what’s going on with your credit cards and did you know spent this much money this month and didn’t have it in your budget. Those are very easy conversations that anybody can have with a client. They just have to start getting comfortable with that.

Dan Hood (12:11):
And particularly if you are, as many of the younger people be neck deep in their data, you’re looking at their numbers anyways. Absolutely. And you’re seeing these things, it’s just as you say, it’s the comfort of saying, of having the conversation saying, I noticed this. So it’s a great opportunity to get people working on that kind of stuff earlier in the process and earlier in their careers. So yeah, good stuff. We’re going to dive more into all of this and we’re going to talk more about staff. We’re going to talk more about what makes a successful CAS practice in minute, but we’re going to take a quick break.

(12:45):
Alright, and we’re back. We’re talking with Kim Blascoe of CPA.com about their recent, well all things CAS, but it’s based on their recent CA benchmark survey. This is the fourth or fifth one that they’ve done and it’s chasing a lot of trends and most important one is the continued fast growth of CAS among accounting firms, both those that have been doing it for a while and those that are new to it. So I want to talk a little bit about what makes a successful CAS practice. What are some of the things that you think are key to running one that works really well?

Kim Blascoe (13:17):
Yeah, and I’m going to share that in a second. I think one of the things I wanted to say about the 2024 CAS Benchmark Survey is we really took a step back and formed really seven major insights. We started off with hypothesis and informed insights off of it. The whole point of that is we really wanted to be able to write an actionable report, so a report that firms could use to guide their success. We’ve never done it that way in the past, but we’re really happy with the end results of the report for this round, which is our fourth round. I think you mentioned that, but some of the things that, I’m just going to mention a couple of the insights that we established and then some of the outcomes that we saw with that. So for example, our insight number two firms can increase revenue by expanding their high level service offerings.

(14:06):
We kind of talked about this already, so most firms about greater than 60% can offer services at all LED roles, but what we’re seeing in the data is they’re not really generating that significant revenue in that CFO and business insights. So I kind of mentioned that earlier. So they’re more like dabbling in there even though they maybe specifically have the ability to do it and they have the right people on their staff, they’re still not quite there to show the revenue for that. So that’s one of those big pieces. And the other insight, which kind of plays off of Insight two, which is insight three, define strategy and planning are key to successful and profitable CAS practice. We saw this in the data, so the practices that actually have a strategy plan that they’re working with for their CAS practices are throwing up stronger numbers. So they’re showing higher growth, they’re showing higher annual client revenue, they’re having stronger net client fees per professional. And that’s one of those metrics that we all very much like. So they show higher there, they’re showing higher margins, they’re showing higher monthly client fees. So we see that in the results of the survey that if you look at and build a good strategy and plan around your CAS practices, that the end results are going to be more successful revenue and growth for your product.

Dan Hood (15:31):
Which just goes back to one of the horrifying facts about the entire CPA profession is that the number of written plans for anything is vanishingly small, very limited that succession planning, they’re not doing enough of it, strategic planning, they’re not doing enough of it CAS that are not doing enough. And this just goes to prove if you would just do it, things will be so much better

Kim Blascoe (15:51):
All the time. Right. Taking the time to view it. It takes time to build a plan. There’s no question about

Dan Hood (15:56):
Right, it’s the spending time working on the business as opposed to working in the business.

Kim Blascoe (16:00):
Yeah.

Dan Hood (16:02):
I do want to just real quick go back to, you talked about if you add more the high value advisory type services that should make more revenue. I’m just curious, do you have a sense of how firms are realizing the ones that are, I’m assuming some do, how they’re realizing that is in terms of do they charge more? Because I think for a lot of people the notion is the monthly subscription, are they raising their subscription fees or are they doing that at some of those advisory services as add-ons? How does that get billed for Just curious as you talked about

Kim Blascoe (16:31):
That. That’s actually a great question and I think firms do it both ways. So some of them do it as add-on fees and some of them do it from a subscription based and you have three options and the top option is where you get your highest level of CFO and business insights with probably your middle one being controller light, CFO types of services. So I think they’re doing it different ways, but definitely what it equates to, and I think most practices are trying to get to inclusion of those higher level services. They’re just struggling a little bit with it. And the one thing that we talk about a lot is when you’re going through a transformation of your cpractice, do you go back to your clients you already have when you’re implementing new changes? So I’m thinking about adding those higher level services. So if you have a bunch of clients that you have today that are controller and transactional types of services and you’re having a really difficult time adding that extra level of service on there because they’re very set in what they’re paying for and what you’re offering today, then what do you do when you go through a transformation?

(17:34):
We usually suggest that you build out your packages and you work with your new clients on those packages. And then once you’re comfortable with that and you’re comfortable with having that higher level CFO business insights as part of your service offering, then you back to your clients that you already are working with and say, we have a great new offering. Here’s what it is. We’d love you to be part of this next level and start working those clients into that. Because it is really hard to move clients into a service offering when they’re already set on what they’re doing with you.

Dan Hood (18:09):
Right? Right. Well, you can always tell ’em, listen, we tested it on these new guys and it works great. So you’re not arguing Pete,

Kim Blascoe (18:16):
Because we and testimonials are a great thing to be able to share with clients too. So we think through that.

Dan Hood (18:23):
Excellent. You had talked a little bit about niching and that you guys are all about niching or strongly in favor of it. I didn’t want to talk a little bit about that. I think there are some firms that say, well, do I really have to, particularly as you’re building it to start, you say, well, I’ve got clients all over the place, which is a totally separate problem of accounting firms. They’re not narrowing their client base and focusing on ideal clients, but a lot of firms do have clients all over the map and they say, do I really have to niche? Can we talk a little bit about that? Why do we think niching is crucial?

Kim Blascoe (18:53):
Yeah, so I think it’s very important and there’s a lot of data that supports that, but even when you think about working with clients and we see in the data the results of the data show that there’s better advisors and there’s more profitability when you’ve standardized your processes and you have experienced staff that are working with similar clients in similar industries, no question about it. We see that in the data. So that’s one of those real struggles though when you talk about that getting to a niche perspective. When we’re talking with firms and we’re just getting started with firms working through a transformation, they literally have clients all over. They’re a generalist practice, their clients are all over the place. It’s very, very rare that they focus on an industry or niche. It’s one of the first things that we make firms commit to when we’re working with them in our coaching program is you need to pick the first one that we’re going to build out.

(19:50):
And there’s a lot of reasons why we do that because they’re definitely, you cannot go out and hire an expert to talk about every single industry that you have your pulse on, right? Firms will never approve that budget. So you have to start with something that’s reasonable. So pick an industry or niche, look at your people that you have working today in there and think about what you’re going to need in the long run because that’s very important. If you’re going to offer those upper level CFO and business insights, you have to have people that understand the industry that you’re working in. That’s really, really important. And we know from the results of the survey that we definitely show better yields when there are industry and niche focuses. Now, I do also leave a little of an open leeway for firms coming in. If you’re new to a CAS practice, you can probably get away with not the first couple of years.

(20:48):
So you can start building some clients with your thought process being down the road. We’re going to need to look at focusing on a niche that is very common because in the beginning, people are just trying to get clients in the door so that they can post some revenue once you get past that first couple of years. And that is probably only if you are not going to offer upper level services. So you can do that also from probably transactional through controller surface services very comfortably or fairly comfortably. Once you get into those upper level services, you really need to have people that understand the industry. So for instance, I’m going to throw out a couple of numbers. So from the results of the benchmark survey, we know that firms, but greater than 50% of the CAS firms that responded that are in a niche, we know that their median CAS revenue is over 2.2 million.

(21:40):
That’s nearly $600,000 higher than the all respondents category. So a significantly different number that makes people think you should think about it and say, okay, I need to think through this because there’s obviously some very good data that supports that. And then also when we think about the data that came back, we had greater than 65% report that all or most of their referrals align with their ideal client profile. That to me is a very substantial number because we work on identifying ideal client profile with firms. So if you set your standards and say, these are the clients we want to work with, and niche is one of those standards that you have, we see that the better referrals come to your CAS practices because we talk to firms all the time and they’re like, they send me terrible referrals. Everybody sends me bad referrals, and then they get mad when I don’t take the referrals.

(22:38):
I’m like, okay, well you need to establish your ideal client profile. You need to share it out to your firm, especially your people that are sending you referrals so that you can then say when they come to you with a referral and you’re like, it does not fit what we’re looking for, so we’re going to push back, do a no. It’s better to keep people upfront understanding that there is a ideal client profile that you’re working for and if they send you good referrals that there’s a really good chance that everybody wins in the end. And the other, I was going to share the 19%, but you already paid

Dan Hood (23:14):
Blew that one. Yeah, that one. Sorry. Sorry. We’ll wrap this up now. I apologize. No, but that was an important number it needed to get out there. People needed. No, what’s fascinating there is that even within the high growth of all firm respondents that there is even that extra room for that much more growth by following would really a set of relatively simple sounding. They’re obviously difficult to implement to build

(23:43):
Industry expertise, for instance, stuff like that. But it’s an easy concept to wrap your head around that you need to focus on these things all through this sort of woven through every answer you’ve given. Everything we’ve talked about so far has been some element of staffing and hiring and finding people, whether it’s finding, helping your young staff feel comfortable advisory work or finding industry experts hiring them, and you’re making the commitment to do that. I want to talk a little bit about staffing. Obviously it’s a huge issue for the profession as a whole, but I think there are some weird, not weird, there are some individual wrinkles in ca where things are a little unusual and maybe we could talk a little bit about how staffing shortages impacting CAS practices and what are they doing to manage it or are they doing things that are different from the rest of the practice kind of thing?

Kim Blascoe (24:28):
I think we’re more progressive in CAS. And what I mean by that is CAS really is staffed differently when we think about the services that we offer inside of CA and how we can staff that. So for instance, there’s a lot of technology involved in CAS. So potentially we could go out and look for tech people that we could then adapt into the CAS environment, but also looking at potentially people that are not on a CPA track. When you look at traditional public accounting firms, most of those individuals should be on a track of CPA, other than maybe the advisory group. So we’re a little more open, which makes a better recruiting bucket if you want to call it that. We’re a little more open to not necessarily having CPAs on staff doesn’t mean we don’t want CPAs on staff. We absolutely do, but it doesn’t mean everybody has to be a CPA on staff.

(25:21):
So that’s a little bit different than probably traditional accounting firms. Also, we do a lot of offshoring. So offshoring used to be a large firm concept. A lot of large firms had offshoring models in some way, shape or form. The beauty of offshoring is it is now really available to any size firm. So offshoring from a perspective of do you have people that are part of your firm as an offshore or do you contract with somebody in one of the shore locations? And technically they’re employees of that contract, but they may be still just your, you get to utilize them only, they don’t work for anybody else. That makes it more available to smaller firms, which is really can be a very beautiful thing. So you have the offshoring thing, plus we’re very tech savvy, very tech heavy in CAS. I mentioned that. So that offshoring model works really, really good inside of CAS as well.

(26:22):
And then the other thing, we’re hearing a lot about ai. Everybody’s talking about ai. We’re very tech heavy. Again, so AI is another one of the areas inside of CAST that I know practice leaders are looking at implementing AI as potentially working with the concept of we don’t as much staff available to us, so let’s do an AI into our tech stack so that we can still maybe even in a better way support our clients with less staff. So we know that’s very real in the industry in itself. And the beauty of CAS is we can have people outside of accounting that come into our, we have analysts that are coming into our space. We have maybe more of the CFO space that didn’t get their CPAs that are coming back to public accounting that are working on those higher level services. So there’s a of different areas inside of CAST that I think give people that maybe have left public that are maybe looking at it and coming back and saying that there’s an opportunity for me to come back and I don’t need my CPA to do that.

Dan Hood (27:33):
Right. Well, and what’s interesting about all of those things is to say it’s progressive. All of those things are things you could apply in other areas of accounting firms to varying degrees, and it’s just, I guess everyone’s letting the CAS practice try them all out and if they work there, then we’ll put ’em in the other areas that are facing some capacity pressures. But very cool. We could talk, there’s a lot more data and a lot more things we could go through, but unfortunately we’re running a little short on time, but I want to take a minute to cast a look forward and where all do you think ca is headed? We talked a little bit about the move to more advisory services and that as whole growth over three year period, expecting strong growth, other areas, other expectations about the future of cas.

Kim Blascoe (28:17):
Yeah, I think you mentioned the growth thing and we definitely know that is happening. The other thing is I think there’s definitely a shift to dedicated staff inside of CAS. No more sharing with other parts of the firm. That is definitely happening. We are becoming even more technology based inside of CAS, so that’s very important to remember that almost everything we do inside of CAS is technology based. And then really firms, we’re seeing firms committing more to that standardization and identification of their ideal client profile and working towards the niche concept as well. It’s all about growth though. When you think about, you mentioned the very first thing is about the growth part of it, so it’s like all these different things that we can do inside of CAS that promote that growth and promote those additional services inside of moving from financial CAS to more of that business insights CAS.

Dan Hood (29:12):
Well, I mean the growth thing right, is if we’re growing fast, we probably wouldn’t be talking about, but with that, I mean it lends a lot of excitement to it, right? This is a very exciting area and that’s a, it’s great set of best practices to end on. Kim Blascoe of CPA.com. Thank you so much for joining us.

Kim Blascoe (29:29):
Thanks Dan. Appreciate it.

Dan Hood (29:31):
And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Wen-Wyst Jeanmary ready to review us on your favorite podcast platform and see the rest of our contacts on accountingtoday.com. Thanks again to our guest. Thank you for listening.